‘We may scrap tax pledge to tackle deficit’

PHILIP Hammond last night hinted that the Tories will scrap their pledge not to raise income tax, National Insurance or VAT.

The Chancellor insisted he believes in ‘lower taxes’ – but warned that the 2015 manifesto commitment limited his ability to balance the books.

The comments were the strongest signal yet that the Conservatives will not include the vow in this year’s manifesto – raising the prospect of higher taxes for millions of middle class families.

Mr Hammond was humiliated after last month’s Budget when he was forced to ditch his plan to raise NI for the self-employed because it broke the 2015 pledge.

Speaking yesterday at the International Monetary Fund in Washington, the Chancellor said: ‘I’m a Conservative. I didn’t come into politics because I believe in higher taxes. I believe in lower taxes.

‘I want to see Britain as a high-skilled, high-employment, high-growth, low-tax, economy. I’m not in the business of having some ideological desire to increase taxes.

‘But I also think we need to manage the economy sensibly, and we need to address the remainder of our deficit, to get our fiscal accounts back to balance.

‘It was clear that the commitments that were in the 2015 manifesto constrain the ability to manage the economy flexibly.’

Mr Hammond also emphasised that he needs to maintain flexibility to raise or cut taxes amid uncertainty over the outcome of Brexit negotiations. And despite his promise to balance the budget by 2022, projections from the IMF this week showed Britain will still be borrowing £14billion a year by this point – unless there are further cuts in public spending or tax increases.

Until now the Tories have been dependent on stealth taxes, such as those on insurance premiums and dividends earned by savers in shares, to narrow the budget deficit.

Treasury officials last night sought to clarify Mr Hammond’s remarks, saying: ‘No decisions have been taken on the tax-lock, our position will be set in the manifesto.’

The Chancellor also said that in the future he hopes to revisit the issue of how the selfemployed often pay less National Insurance and taxes than their counterparts on company payrolls.